CBI Urges UK Govt To Step Up Tax Incentives For Green Growth In New Report

CBI Urges UK Govt To Step Up Tax Incentives For Green Growth In New Report - Carbon Herald

A new report from the Confederation of British Industry (CBI) suggests that the UK should employ tax incentives strategically to excel in high-growth green sectors, rather than solely relying on expenditure to outdo global competition.

Unlocking the potential of green growth is crucial for both combating climate change and boosting the economy, and the UK should “outsmart rather than outspend the competition,” according to the CBI Tax and Green Investment report.

The green economy presents unmatched opportunities to fulfill the commitment to decarbonization by 2050, potentially adding up to $72 billion (£57 billion) annually to the island nation’s gross domestic product (GDP) by 2030.

However, the UK faces the risk of lagging behind international competitors, particularly the US and the European Union (EU), which have implemented significant reform packages, such as the US Inflation Reduction Act and the EU Net Zero Industry Act, offering incentives like tax credits, subsidies, grants, and loans to encourage green investment.

To address this challenge, the CBI recommends several strategic measures aimed at key green technologies, signaling to businesses that the UK is committed to green initiatives and prepared to invest:

  1. Introducing a Green Innovation Credit to stimulate private sector research and development (R&D) and innovation in areas like carbon capture, electric vehicles, heat pumps, biofuels, and hydrogen production, with a proposed tax credit rate of 40%.
  2. Lowering the corporation tax rate to 10% for profits derived from the development, manufacture, and sale of specific green technologies, such as batteries for electric vehicles and heat pumps, to incentivize their commercialization.
  3. Implementing an enhanced green super-deduction rate of at least 120% to support capital investment in various green initiatives, including electric vehicles, low carbon power, biofuel refining, and carbon capture, utilization and storage (CCUS) adoption by heavy industry.

Relevant: EU Parliament Approves The Carbon Removal Certification Framework And Net Zero Industry Act

The CBI Chief Executive, Rain Newton-Smith, emphasizes the urgency for the UK to regain its lead in the global green growth race, urging the government to leverage the tax system to incentivize green investment.

“Public funding alone will not be sufficient,” he stressed.

As political parties gear up for the next General Election, the chief executive calls for prioritizing green growth in manifestos through a comprehensive tax package.

Industry experts, like Jonathan Dunn from London-based mining major Anglo American (LON: AAL), also highlight the importance of effective tax policies in addressing climate change and fostering innovation.

Tania Kumar, the CBI’s Net Zero Director, underscores that investing in green growth not only boosts the economy but also helps meet carbon budgets and climate commitments, emphasizing the need for a review of the tax system to ensure it supports the transition to net zero.

Read more: Inflation Reduction Act May Cut US Emissions By 40%

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